In today's world, any business that conducts transactions with customers or clients will need a streamlined system for tracking sales and orders. This is where point of sale (POS) systems come in.
In fact, POS systems have become so integral to modern business operations that the global POS platform market was valued at $15.64 billion in 2019 and is on pace to reach $29.09 billion.
But what exactly are POS systems and why are they an essential business need?
A point of sale is a place and time where a customer conducts the payment for a merchant's goods and services. To put it simply, whenever a customer completes a purchase at your business, they are, in effect, executing a transaction at a point of sale.
This also means that a point of sale can be in different locations, including
- In a store, where the POS system is integrated into terminals at checkout counters
- On mobile devices, such as smartphones and tablet devices, typically carried by servers in restaurants
- On the Internet, specifically, in the checkout pages of eCommerce stores
The POS, however, isn't just for processing payments. It's often the central financial component of any business - a hub for debit and credit card payment processing, paying sales tax, inventory management, and customer management.
It's no surprise that an increasing number of small businesses are realizing the importance of investing in POS systems as soon as possible. The right POS solution can make a world of difference in the amount of time a business spends processing sales, teaching staff to accurately process customer transactions, and replenish stock - all while giving the company a wealth of data to help improve operations and customer service.
The following hardware components will be found in the majority of businesses that utilize a POS system.
- Monitor - The monitor shows the company's product database and is the primary interface for using the POS software. Modern terminals have a touchscreen monitor, but legacy systems still use the traditional PC, keyboard, and mouse combination.
- Tablet or Mobile Device - Cloud-based PO systems, on the other hand, can be installed in tablet devices and even smartphones. These solutions are ideal for businesses in the food and beverage, retail, and events industries as staff members are always on the go.
- Barcode Scanner - Barcode scanners automate the checkout process and allow the POS system to pull product information after scanning and add it to the checkout total. As the purchase is completed, the POS system will simultaneously adjust the stock level information to reflect the change.
- Card Reader - Debit and credit card readers allow the POS terminal to accept and process card payments. More recently, the rise of NFC (near field communication) technology has allowed users to pay for purchases using their mobile devices through services like Apple Pay.
- Cash Drawer - Despite the popularity of using cards and mobile devices for payments, cash is still essential for the foreseeable future. Therefore, businesses still need a place to keep bills and loose change.
- Receipt Printer - Despite the growing popularity of text and email receipts, paper receipts continue to be an indispensable way of providing customers proof of their purchase.
As mentioned earlier, today's POS solutions are packed with more features than ever before and are capable of simplifying and automating various business processes. This can leave business owners and managers confused about what POS software to invest in. However, any reliable POS system will have these essential software features.
- Sales Reporting - This is the core function of any modern POS system. Where things diverge, however, is how data is gathered and presented, how easily users can access their sales data, and how deep they can drill down (i.e., level of detail). At the very least, a POS system should be able to track sales and produce detailed reports based on product and item type, cost of goods sold, net sales, gross margins, and employee sales.
- Customer Management - When it comes down to it, retaining existing customers is cheaper and more efficient than acquiring new ones. This is why a POS system should have the ability to attach transactions to customers, keep a record of purchase histories, and capture customer information (e.g., name, date of birth, email address, and phone number). This information can then be used to create a loyalty program to encourage repeat purchases.
- Inventory Management - A POS system should also have the ability to keep track of inventory movement. This allows the business to stay on top of stock levels in real-time and know when to reorder certain products or raw materials.
- Employee Management - A POS system should have the ability to set sales targets and keep track of each staff member's sales performance throughout a given timeframe. The POS solution should allow managers to add employees to the database, upload work schedules and email these schedules to staff, and create reports of individual employee sales and commissions.
No two businesses are completely alike, so it should come as no surprise that different companies can have specific criteria for choosing a POS system. With so many solutions on the market, what factors should business owners consider when choosing a POS solution?
1. Setup Costs
The best POS systems don't come cheap, especially when it involves using proprietary hardware (i.e., hardware from a POS provider). But the good news is that the running costs of a POS solution are relatively low. Still, business owners and managers need to think carefully about how much money they're willing to invest in their POS hardware and software.
2. Compatibility With Existing Infrastructure
It can be easy for business owners to be enamored with the bells and whistles of a POS system, only to forget that the product also needs to be compatible with the company's infrastructure. For starters, can the POS system be integrated with the company's website? How about its accounting software and existing hardware (e.g., computers, cash registers)?
3. The Company's Immediate Needs
Many POS providers offer systems designed for specific types of businesses, including restaurants, cafes, fitness gyms, and retail stores. Business owners and managers should take the time to do their homework and understand what they need from a POS solution before shopping around.
4. To Go Cloud-Based or Not
The cloud-based POS systems market reached a value of $1.5 billion in 2018 and is expected to grow by 24% from 2019 to 2025. The reason for this surge is simple- mobility. Unlike traditional POS software which depends on servers or a physical brick and mortar store location, cloud-based systems simply need an Internet connection to store and access point of sale data in the cloud. This allows the POS software to be installed in a wide range of hardware devices, from touchscreen terminals to tablets and smartphones.
Finally, no business can afford to waste money on a point of sale solution that's unwieldy and takes too long to understand. If it takes several weeks for employees to become comfortable with a POS system, they are ultimately wasting time that could have been spent performing other essential duties.
Remember, a usable POS is one that captures the data the business needs to help staff members become better and more efficient at their jobs.
Every time a business uses its POS, the system creates a myriad of data points that include-
- The time and date of the purchase
- The customer's purchasing habits
- The value of the item purchased
- The number of units in stock
This data is essential to the business, its profitability, and long-term growth. Businesses can begin collecting and analyzing POS data by focusing on key areas, such as-
- Sales - Which products are selling well and which ones are not? For online stores, where are these products most popular? Analyzing this information leads to a better understanding of customer demand and improves inventory planning.
- Promotions - Are the company's marketing promotions generating sales? Are people using coupon codes and vouchers when checking out items online or in-store? This analysis helps in measuring the impact of the company's marketing efforts.
- Pricing - Pricing analysis allows the business to increase profit margins based on POS data, product movement, and upselling effectiveness.
While today's POS systems are more advanced than ever, their basic function remains the same - to complete transactions. However, they also offer other compelling benefits, such as-
1. Time and Cost Savings
Enhanced efficiency is perhaps the most obvious reason to get a modern POS system. A POS solution allows businesses to become more efficient in sales and other areas of business, from marketing and customer relationship management (CRM) to inventory tracking and forecasting.
2. Improve Functionality
A POS solution can dramatically improve a business's functionality, specifically by digitizing the process of recording sales and tracking inventory in real-time. For example, a restaurant POS system can act as a traditional cash register while performing other functions, such as-
- Manage seating and reservations
- Process debit and credit card payments
- Automatically process gratuity
- Allow a group of customers to split the check
- Process online orders
3. Reduce Human Error and Risk of Theft
Apart from calculating sales-related activity in the business, POS systems also do much of the behind-the-scenes work of facilitating stock takes, order fulfillment, and all types of inventory movement. Instead of having staff members perform these processes manually, POS systems can automate routine tasks and reduce the risk of employee error. In turn, this allows staff members to focus on more strategic and value-creating activities.
In addition, by centralizing payments and inventory records, POS systems can help prevent theft and better hold employees accountable for their work.
4. Improve Customer Experience
A POS system can dramatically improve the customer experience in-store and online. For example, a clothing retail store that uses a cloud-based POS system can help customers know if certain sizes or colors of an item on display are in stock without sending staff to check the stockroom. The POS system will show this information on the terminal or mobile device.
For online stores, a retailer's POS system can offer suggestive selling based on a user's past purchase and browsing history - something 83% of sellers do today.
5. Access to Real-Time Data
Finally, deploying a POS solution allows the establishment to gather business intelligence and discover actionable insights to improve the business. With accurate data, merchants can craft practical strategies and make informed decisions.
For example, a POS system's analytics features can show business owners low stock counts and best-selling items throughout the year. This helps uncover patterns in seasonal demand, which then helps the business make stocking decisions and reduce inventory holding costs.
Bottom line? The importance of point of sale systems in today's business world can't be understated. But as with any other investment, it pays to research the best POS systems for your needs. Shop around, talk to multiple providers, and find out how a solution can create value in the company.